Contributing to your IRA is a wonderful way to save for your future. You still have time to contribute to your traditional and Roth IRAs for the 2018 tax year; even though we have already begun 2019.
Using an IRA, whether it is a traditional or Roth, gives investors the opportunity for tax-deferred growth during the accumulation phase.
For many, the accumulation phase is from the time they start earning income from a job or career to the time they retire from the workforce.
After the advantage of tax-deferred growth, the benefits of a Roth or Traditional IRA differ. Two big differences are whether or not you get to claim deductions for your contribution and whether or not you can make a contribution at all.
Unfortunately, no contributions to a Roth IRA allow for tax deductions and there are adjusted gross income (AGI) limits that determine contribution eligibilty. However, these disadvantages are offset by a huge benefit for eligible investors in the future after age 59.5 because withdrawals from the account do not count as taxable income.
Basically, if the account has been held for more than 5 years, earnings and withdrawals are withdrawn tax-free when you start using the account for retirement income - Awesome!
Like traditional IRAs, 2018 maximum contribution limits are $5500 for those under 50.5 and $6500 for those older than 50.5; for 2019 the maximum limits are raised an additional $500.
Traditional IRAs do not have contribution cut off limits and allow tax deductions if your AGI and filing status qualify for deductions. Claiming tax deductions for contributions is based on your adjusted gross income (AGI), filing status (married, single, or head of household), and whether or not you’re covered by an employer sponsored retirement plan such as a 401k or 403b.
Knowing contribution limits, and ensuring that you take full advantage of your traditional or Roth IRA contributions are important for your retirement planning. At Faith Investment Services we help many people.
Each scenario is unique and has a unique solution for retirement planning. If you would like to have a conversation to discuss what strategy is best for you, we would love to help you.
